NAFTA

manufacturer worker checking engineering file on a laptop

The issue

President Trump has been a longtime critic of the North American Free Trade Agreement, a landmark pact that has boosted trade between the United States, Canada and Mexico for a quarter-century. Shortly after taking office in 2017, he launched renegotiation of the agreement. After a year of talks with Canada and Mexico, Trump told Congress in August 2018 that he planned to sign an agreement reached with Mexico alone but that Canada might still be added. NRF said coming to terms with Mexico was “encouraging” but called Canada “an essential trading partner” and said all three countries must be included to preserve the agreement’s benefits to U.S. businesses, workers and consumers.

At the end of September 2018, the administration announced that the new pact had been expanded to include Canada and would be called the United States-Mexico-Canada Agreement rather than NAFTA. The new agreement was signed in November, and NRF said it “takes many important steps toward giving us a modern trade agreement.” The agreement is subject to approval by Congress, but both Democrats and Republicans have voiced objections to various provisions. The administration is pushing for consideration this spring and is hoping for a vote by June. Trump has repeatedly threatened to withdraw from NAFTA in order to put pressure on lawmakers, but NRF has said doing so without a replacement in place “is simply not an option.”

Why it matters to retailers

Like other trade agreements that have reduced barriers to international trade, NAFTA helps retailers provide American families with the products they need at prices they can afford. A study conducted for NRF and other trade associations found that withdrawing from NAFTA without a replacement would cost consumers $5.3 billion in higher prices because of tariffs that would be imposed on goods from Mexico and Canada. Retailers would see a $10.5 billion hit to their bottom lines, and 128,000 retail-related jobs could be lost over three years.

NRF advocates for a ‘do no harm’ approach to NAFTA

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NRF has worked to ensure that NAFTA modernization efforts do not harm the underlying agreement. NRF agrees that a number of NAFTA’s provisions need to be updated to reflect today’s business environment, including issues such as digital trade, for example. But NRF told the Office of the U.S. Trade Representative that the priority in negotiations should be to “do no harm” to the existing pact.

NRF has said threats by the White House to withdraw from NAFTA or include a sunset provision “should be a non-starter.” Restrictive new rules of origin, new trade remedies and the elimination of investor protections would significantly weaken the agreement and should be rejected. In an op-ed, NRF President and CEO Matthew Shay said an end to NAFTA would cost the United States jobs and harm the economy while resulting in higher prices for consumers and reduced availability of products ranging from apparel and electronics to fresh fruits and vegetables.

NRF has helped lead lobbying visits to Capitol Hill to reinforce the message that the business community supports NAFTA modernization but opposes withdrawal without a replacement. NRF wants Congress to assert its oversight authority to ensure that the new agreement improves on NAFTA rather than weakening it.

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